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Where is Nifty50 headed in 2H2021? Technical experts see volatile path towards 17,000

Experts say the next target of Nifty50 is 16,800-17,000 in 6-12 months, but there may be volatility as most of the good news such as vaccination, earnings and economic recovery has already priced in

July 01, 2021 / 02:22 PM IST

Nifty50 has further upside after its gravity-defying rise to record levels despite the second wave of the pandemic, but bulls may be losing steam and the market would be prone to volatility, technical experts say.

The index has risen over 13 percent so far in 2021 and over 50 percent in the past year, soaring to the peak of 15,915 on June 28, 2021.

Experts say if the momentum continues, the next target is 16,800-17,000 in 6-12 months, but the journey would not be linear, like it has been for a year, as most of the good news, be it vaccination, earnings or economic recovery, is already priced in.

Stock-specific action will continue, but traders should refrain from using excessive leverage and remain invested in quality stocks across market-capitalisation.

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Technically, the Nifty50 managed to give a breakout from its previous all-time high level of 15,431 in May 2021 and formed a strong bullish candle.

RSI has remained flat since the beginning of 2021 and now it is attempting to enter the overbought zone, indicating that the bullish momentum may start to resume now.

The index continues to trade above all its major moving averages (50, 100, and 200 SMA) indicating short-term strength.

The index saw follow-up buying in June and formed higher high-low formation, and in the last 3-4 weeks it has consolidated between 15,600-15,900 levels.

“Nifty has been making a series of higher highs and higher lows since April 2021, and once the index breaks above the crucial resistance placed at 15,900 on a closing basis, we can see it rallying towards 16300-16500 levels in the short-term,” Rajesh Palviya, VP – Technical & Derivative Research, Axis Securities said.

“On the lower end, 15,350 to 15,450 remains crucial support to watch for the next 3-6 months. Looking at short to medium term setup till Nifty trades above 15,000 level on weekly closing basis, the trend is likely to remain on the bullish side,” he said.

“Monthly Strength indicators are in the bullish zone, suggesting Nifty could extend its up move towards 16,800-17,000 in the coming 6-12 months. One should use any minor corrective move as a buying opportunity,” recommends Palviya.

Market breadth has improved significantly as midcap and smallcaps indices are also in a bullish zone which indicates the broader market is going to extend its up move in the coming months.

Core Sector like IT, Metal, Cement, Banking & Financial, Capital goods are in the bullish zone which also indicates bullish bias ahead.



Rajesh Nifty

We spoke to various technical experts to get their views on the Nifty50 for the next 6-12 months:

Expert: Mehul Kothari, AVP – Technical Research at AnandRathi

Recently, the index Nifty50 registered another lifetime high of 15,915.65 and is now trading below the 15,800 mark. If we look at the current price action, we can conclude that although the index is inching higher, it's dragging itself.

This indicates that the bulls are losing steam, and if we look at the technical target then the consolidation breakout above 15,400 has the potential to bring the index near 16,200-16,400.

However, that could be the buying climax for the markets because at this point in time there are some red flags that we are observing. The derivative stats indicate that retail participation is highest in stock futures in comparison to the past few years.

They have a net of over 9.5 lakh contracts longs in the stock futures and that seems to be a bit heavy. The data is indicating some kind of over-optimism.

Secondly, the index NIFTY 500 is stuck at the larger degree trend line resistance at the 13,700 mark. This resistance coincides with the 200 percent retracement of its previous move.

The above points dictate that we are reaching an exhaustion point for broader markets.

If we assume that Nifty slides further from here on then in that case 15,400 would be the decisive support and its breach would drag the index towards 15,000 levels. That could again be a buying opportunity.

On the whole, we are bullish on a larger perspective but we expect a corrective move in the market. Will that move come after crossing 16,000 or it has already started, that needs to be watched.

We advise short-term traders to stay extremely selective while picking up long bets and remain vigilant in case of any ambiguity going further. Investors should wait for a significant dip to create fresh longs.

Mehul Nifty

Expert: Pritesh Mehta, Lead Technical Analyst - Institutional Equities, YES SECURITIES

Post recent congestion, it is essential for Nifty to stage a decisive move above multiple supply points between 15,850-15,900 to regain impetus.

The index has struggled to break on the upside, yet downside momentum has not been strong enough, which highlights the influence of support. The Nifty defended the confluence of support of 15,400 (i.e. midpoint of previous three-digit Gann channel, the peak of Feb 2021).

Breadth studies show that 92 percent of Nifty stocks are trading with RSI between 30-70, implying most of the stocks are going through the congestion phase, despite the recent dip. Yet, 90 percent of Nifty constituents are now trading above 50-DMA (improving breadth & improving price), displaying strength.

We conducted an exercise to understand the long-term breadth of our market. In fact, all the constituents of FMCG, IT, Metal, PSE, PSU & Energy indices are trading above 200-DMA.

While, 96 percent of Nifty stocks, 90 percent of our Nifty top 10 stocks, more than 90 percent of components of our broader markets (i.e. Midcap 100 & Smallcap 100 indices) are trading above its 200-DMA. So, it is perceptible, that rally is not confined to a handful of stocks from Nifty 50.

A broad-based buying is evident. Every week, several sectoral indices are outperforming Nifty, suggesting that the game of musical chairs is at play.

Keeping in consideration, the pattern of higher highs and lows, up-sloping averages and index consolidating at the top with breadth hovering around overbought terrain are common qualities in a bullish market. Till index is not showing the structure of lower peaks & lows; we believe that it’s not broken, till it is broken.

P&F (0.5%*3) chart of Nifty shows a break above the column of X (anchor column) seen earlier in Feb 2021. Rally since the second half of May 2021 has resulted in bullish turtle, diagonal triple top breakout and ABC breakout which provides an upside target towards 17,200 zone.

Corrective action from Feb to early May 2021 failed to sustain below the 45-degree support trend line, resulting in a reversal, double-top buy pattern, and a move above the 10-column moving average. In a bull case scenario of such a move implies a rally towards above the 17,000 mark in the long term. Below 14,600, the upside projection will be void.

Pritesh Nifty

Expert: Dharmesh Shah, Head – Technical, ICICI direct

Indian equities have remained at the forefront of a structural bull market globally, that unfolded from March 2020 lows. we are in the middle of a multi-year bull market, with 17,300 as the next major milestone for the Nifty over the next nine to 12 months, led by BFSI, IT, auto, consumption & Infrastructure.

The target is based on three year (2018-20) breakout implication (12430-7511) projected from breakout level of 12,430. We expect the journey to 17,300 to be non-linear in nature. Hence, intermediate bouts of volatility should not be construed as negative.

They should rather be used as an incremental buying opportunity to build quality large cap and midcap portfolios. Strong support base is being established in the 14,200-14,400 region, which we do not expect to be breached.

Dharmesh Shah Nifty

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Kshitij Anand is the Editor Markets at Moneycontrol.

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